Glossary of terms

50/50 Option – The ability for contributing members of the LGPS 2014 scheme to pay half their employee contribution rate in return for half accrual rate. If you are a member of the LGPS after 1 April 2014 and you are not a member of the 50/50 you are a member of the Main scheme.

ABS or Annual Benefit Statement – An annual statement of your pension beneifts as at a point in time, issued by a LGPS Fund.

Accrual rate – The proportion of pensionable pay that each year of membership adds to your pension – effectively the speed at which your pension builds up.

Actuarial reduction – Also called the ‘early retirement reducation factor’ or ‘early retirement factor’. The amount an LGPS pension is reduced if it is taken before an individual’s Normal Pension Age.

Actuarial enhancement – The amount an LGPS pension is increased if it is taken after an individual’s normal pension age.

Added pension – Members can purchase added pension, up to £6,675 of pension, payable at the appropriate pension age.

Added Pension Contributions (APC) – A contract where a member can pay back lost or added pension.

Admitted Body – This is an organisation that chooses to be admitted to the LGPS in order to provide access to the scheme for some or all of its employees.

Additional Regular Contributions (ARCs) – ARCs were introduced to the LGPS on 1 April 2008 and have been replaced from 1 April 2014 with Additional Pension Contributions (APCs), see above. However if you had an existing ARC contract in force prior to 1 April 2014, this will continue from April 2014 on the terms of the original contract.

Annual Allowance (AA) – Click to go to the Tax allowance page.

Assumed Pensionable Pay (APP) – This provides a notional pensionable pay figure to ensure your pension is not affected by any reduction in pensionable pay in certain circumstances.

Annual Benefit Statement (ABS) – An annual statement of your pension beneifts as at a point in time, issued by a LGPS Fund.

AVCs – Additional Voluntary Contributions – Extra contributions a member can pay in order to increase their pension benefits. An AVC will be a contract set up with an external company that the LGPS Fund has chosen.

CARE Career Average of Revalued Earnings. An alternative type of defined benefit pension scheme to a final salary scheme.

Contribution banding – The nine bands according to your pay depends which contribution rate a member of the Main scheme will contribute.

Contribution rate – The rate from the banding, as above. A 50/50 Section member will pay half of the rate.

Conversion of pension – see Trading pension

CPI – Consumer Prices Index. This is the current measure of inflation that the government has decided to use to ensure benefits from LGPS 1997, 2008 and 2014 keep pace with increases in the cost of living.

Cumulative Pensionable Pay (CPP) – From 1 April 2014 your CARE benefits are calculated using your CARE Pensionable Pay, this pay is also known as your Cumulative Pensionable Pay. Your CARE (or Cumulative) Pensionable Pay is the actual pay that you have paid pension contributions on over the Scheme Year (1 April 2016 – 31 March 2017). The definition of CARE Pensionable Pay is the same as that shown above, for Final Salary Pensionable Pay, however it does include non-contractual overtime. The full definition of CARE Pensionable Pay, under the LGPS Regulations 2013, which includes a full list of exclusions, can be found here.

Deferred pension – Pension built up by members who leave pensionable service before retirement.

Defined benefit – An occupational pension scheme benefit that determines how much pension you will get by reference to a set formula, rather than the performance of investments and cost of annuities.

Designating Body – This is a group of employers in which the employer has to designate employees to join the LGPS Fund. An entry in the minutes of a Board Meeting needs to show the employees name, scheme they are joining, the start date and that this entry is being approved. Previous name for Designating Body is a Resolution Body.

Employer Self Service (ESS) – Employer self service gives all employers access to their corresponding Altair pensions database remotely and securely over the internet.

Final salary scheme – A type of defined benefit pension scheme in which your pension is largely determined by your salary at retirement. The Local Government Pension Scheme (LGPS) is a type of Final Salary scheme.

Gross contribution rate – The percentage of pensionable pay which is deducted from pay before any account is taken of tax relief on pension contributions.

Resolution Body – This is a group of employers in which the employer has to designate employees to join the LGPS Fund. An entry in the minutes of a Board Meeting needs to show the employees name, scheme they are joining, the start date and that this entry is being approved. Another name for Resolution Body is a Designating Body.

Revaluation rate – The index by which pension builds up each year is increased in order to retain its value.

RPI – Retail Prices Index. This is the measure that was used prior to April 2011 for increases to pensions in payment and deferment. This has been replaced by CPI.

Retirement Age – See Normal Pension Age.

Rule of 85 – A provision in the LGPS 1997 that enabled some members with long service who retire below 65 to have their pension unreduced. This has been phased out, but some members have protected service under the transitional protection arrangements made in 2006.

SERPS – State Earnings Related Pension Scheme – This is the extra earnings related part of the state pension that employed people could earn up to 5 April 2002. LGPS members were automatically contracted out of SERPS, and most paid lower national insurance contributions. SERPS was replaced by the State Second Pension (S2P) (see below) from 6 April 2002.

State basic pension – This is a flat rate pension paid by the UK government from state pension age (see below) to anyone who has paid enough National Insurance contributions.

State Pension Age – The age at which, based on your date of birth, your state pension becomes payable.

State second pension (S2P) – This is the additional element of the state pension in the UK and is payable by the Department for Work and Pensions. From its commencement S2P was earnings related pension but from April 2009 it began building up as a flat rate pension, achieving full flat rate accrual by around 2030. LGPS members are contracted out of S2P and most pay lower National Insurance contributions as a result.

Strain cost – see Actuarial reduction

Tax relief – In the LGPS your pension contributions are deducted from your gross pay before income tax is calculated. This is called the net pay arrangement method of giving tax relief and it enables you to automatically receive tax relief at your marginal rate of income tax through payroll without having to claim it from HM Revenue and Customs.

Trading pension – The ability for members to swap £1 of annual pension for £12of cash lump sum up to a maximum allowed by HMRC.

Transfer In – For information on transferring in previous service please see our page Transferring in service.

Transfer value – A transfer value is your pension rights calculated and converted into a single cash sum.

Vesting Period – The vesting period is the service period when members can get a refund on their contributions if they leave the scheme instead of having a small deferred pension in the scheme until retirement.